Major label A&R crisis? What major label A&R crisis?

By now, you’ve probably seen the figures.

The BPI says that 156 new artist signings were inked by UK major labels last year.

Yet according to MBW analysis, just nine new acts released debut albums in 2014 that reached the market’s gold (100,000) sales status – which equates to a frightening hit rate of 5.7%.

Conflating these two numbers should be done with a fair old pinch of salt, of course – these signings were very unlikely to release an album in the same year they joined their label, for example.

But as a ballpark estimate, it shows the harsh reality of modern A&R, especially at a major record company: a very high risk game, with very few big winners.

That’s especially true when you consider that only around 3-5 home-sourced debut albums reach platinum (300,000 sales) each year in the UK, which equates to just 2-3% of all new annual signings at the majors.

One of those signings last year was George Ezra, whose debut LP shifted over 600,000 in 2014 alone. (The only other platinum seller in the year was Capitol-signed Sam Smith, who sold over 1.2m.)

The A&R mind behind Ezra’s album, Alison Donald – co-MD of Columbia Records UK – joined MBW on a panel at Music Futures in Newcastle yesterday to discuss the above scary figures and other challenges facing modern artist development at a major label.

In 2015, when only three debut artist albums have reached gold in the UK so far, the title of our discussion was an appropriate one:

A&R Crisis? What A&R Crisis?’

Donald is a seasoned veteran of getting the best out of artists and writers, having previously run Chrysalis Music and been Head Of A&R at Warner/Chappell – working with and/or signing the likes of  Damon Albarn, Cee Lo Green, The Strokes, Fleet Foxes and Mark Ronson during her career.

Alongside her in our panel sat two fellow thoroughbreds of the UK A&R scene.

First up was Jim Chancellor, President of UMG’s Fiction Records and co-MD of its thriving services division, Caroline International.

During his career, Chancellor has signed and broken artists such as Snow Patrol, Elbow, Nick Mulvey and The Maccabees – a band he brought to Fiction nine years ago, and who still call the label home today.

Finishing the line-up was Nick Gatfield, former CEO and Chairman of Sony Music UK, who has also worked at the very top of EMI and Island Records.

Gatfield, whose 30-year record label career includes A&R work with Amy Winehouse, Radiohead, Deadmau5 and One Direction, now runs Twin Music Inc – an independent organisation that offers seed funding to on-the-rise artists and music businesses.

Chancellor, Donald and Gatfield (pictured above) all have unique and high-stakes experience of A&R at a major, and know the thrills and pitfalls of the game better than almost anyone.

Below are the highlights from our chat on the tricky subject of signing (and dropping) artists at a major label organisation.

Read on to absorb some priceless knowledge… and appreciate just how tough blockbuster A&R has become in the modern industry.

Alison, you run a big frontline label at Sony. Judging by the data MBW analysed this week, only 2-3% of new artists will go on to have a debut platinum album in the UK – around one in 30-40. You achieved that with George Ezra last year – but are you worried about those stats?

Alison: Well, yes, obviously. But I think they’re somewhat exaggerated as well. It all depends. The big question is, should we still be judging a success by charts and record sales alone?

Having been a publisher as well as working in a record company, I know there are multiple revenue streams for each artist.

We have some artists, like George Ezra, who, I’m delighted to say, made a great [platinum] record and captured the public’s imagination. But then we have French electronic artist Madeon, who may not have sold as many records as [Ezra] but his live income, his sync income, all of the ancillaries make up a very good deal for everyone.

“Should we still be judging a success by charts and record sales alone?”

Alison Donald, Columbia

So you have to be very bespoke about it. When you do a deal, some artists are more track-based, other artists are more album-based. Some artists lend themselves brilliantly to sync, others have incredible live, like Bring Me The Horizon on RCA, for example.

There are multiple ways now to judge success and value. And you have to factor in international success [the MBW numbers are UK-only].

After we signed George on a development deal, Nick [Gatfield, then Sony UK boss] played it at an international conference. The head of Sony Italy said it was fantastic, I want to go with it now. We said: ‘Okay, why not?’

We had a Top 10 record in 12 countries throughout Europe before it actually went to radio here in the UK.

Nick, you worked at the very top of a UK major label at Sony for over three years. Reporting into Doug Morris, you were very close to the pressures of a global corporation’s quarterly targets. Now you’re running a completely different independent organisation. What problem at the majors are you trying to solve?

Nick: The problem the majors have is really one of structure – of size and scale. This is no anti-major rant; I do a lot of business with the majors.

Jim’s story with The Maccabees is testament to him, the band and Fiction. But it’s a rare story in the major world right now; allowing a band to grow over [a decade].

The reason for that is because of the financial pressures put on the company. When you’re running an organisation like Sony, you’re running a $200m – $300m operation where you’ve got quarterly reporting and financial targets you’ve got to hit.

“By hook or by crook, you make your numbers. But it’s usually got nothing to do with the business plan you started out with.”

Nick Gatfield, Twin

It always used to make me laugh in the music business that we’d sit and plan and plan and plan and create a budget that matches the release schedule.

Then generally speaking, by hook or by crook, you make the numbers. But it’s usually got nothing to do with the business plan you started out with.

For instance, with George Ezra, we probably put him down for something like 30,000 units – an okay development project. Meanwhile, something that was buzzing and on fire which you pay through the nose for just stiffs.

That’s the great thing about the music business. The longer I’ve done it, the more conclusive proof I’ve found that nobody really knows anything.

Jim: Fact.

Nick: Nobody could have predicted that Ed Sheeran would have become the artist he is today. I guarantee you.

Least of all the Island A&R who dropped him!

Nick: Precisely, to name but one. Warners came quite late to the [Sheeran] deal, I have to say, but to their credit they signed him.

He just didn’t tick any boxes. I’m not a ginger-ist, but he was a ginger and that was a problem for a lot of people, as ridiculous as it sounds.

There’s a huge pressure on delivering numbers [at a major]. A lot of that is portfolio management.

“You can’t have 50 artists sitting on long-term development deals on your roster. you’d be out of business.”

Nick Gatfield, Twin

It’s great when you can nurture something like a George Ezra or The Maccabees. But you need those signals along the journey that you’re doing the right thing.

With George, it was signed incredibly early, and credit to the [Columbia] A&R team for doing that… But you can’t have 50 of those artists sitting on long-term development deals on your roster. You’d be out of business.

You need quick fixes, you need superstars – you have to balance that portfolio. It’s a constant juggling act.

That’s possibly why these new A&R stats are quite so worrying. Majors need big, big hit albums just to pay the bills.

Nick: At the majors, you’ve got such an overhead to support. Generally speaking, you either hit it out of the park or you fail. There’s no ‘middle class’ of artist at majors anymore.

In all the years, I’ve done [A&R] I’ve met very few artists who say: ‘I just want to make sh*tloads of money.’

99.9% of artists do this because they want a career making music and want to earn enough money to continue doing so.

So then you look at brand partnerships, sync income, merch income, publishing – there are multiple revenue streams you can support an artist with [outside of a record deal].

“Just because you sign an artist in the UK, it doesn’t mean that anyone in the US is going to give a shit.”

Nick Gatfield, Twin

At Twin, we invest in emerging talent in much the same way that an angel investor would invest in a startup business: we work out a strategy with the artist across all those revenue streams, and try to grow their audience. I’m very interested in that ‘middle class’ of artist.

Another thing at majors, it’s invariably drilled into you: you have to sign worldwide deals. Of course, majors are global companies, with global overhead.

But just because you sign an act in the UK, it doesn’t mean anybody in America is going to give a shit about it.

[At Twin], I’m finding pockets of interest for emerging talent wherever they happen to be: it could be Australia, Latin America, the US…

So your artists’ small businesses aren’t predicated on the business needs of a global corporation…

Nick: No, they’re not. They’re predicated on making enough money to continue doing it. And after that, you might get your opportunity to hit it out of the park at a major.

Jim, what about this idea of ‘data-led A&R’? You speak with real passion about the likes of Elbow, Glass Animals, The Maccabees… Does the idea of A&Rs getting excited over massive YouTube numbers or Twitter followers ahead of actual music make your heart sink?

Jim: Yeah, a little bit. I don’t know – I guess if people like it, people like it. There’s nothing wrong with that.

But then what’s [an A&R’s] role? We’ve got some young bands [at Fiction] and the numbers are terrible – because they’re young and nobody knows who they are.

Data is great, but I wouldn’t hang your coat on it – [A&R] is all about taste.

“Metrics? They’re a band from canada.”

Jim Chancellor, Fiction/Caroline International

Terrible example, but just look at X Factor. How many of the winners have been the biggest stars? Normally it’s the ones who come fifth!

So I don’t know if the general public are best placed to pick [priority artists]. I don’t mean to belittle the general public there, I mean… why would they know?

[A&Rs] get exposed to a ridiculous amount of stuff and develop filters over time.

As for metrics? They’re a band from Canada.

But if an act that really excites you has zero YouTube views and zero Twitter followers, isn’t that an opportunity?

Jim: Absolutely. But it’s also scary. It’s safer to sit back, wait and let the artist develop. Hopefully with Nick’s money [crowd laughs].

I’ve seen quite a few artists who’ve had really amazing data… and then you go into the meat and drink of making records and it doesn’t happen.

“I’ve seen artists do amazingly well on soundcloud. Then you go to see them live and there’s five people there.”

Jim Chancellor, Fiction

SoundCloud is an amazing thing – I’m not sure the business model is where it needs to be, that’s for a different panel.

But I’ve seen artists do amazingly well on SoundCloud, then I’ve gone to see them live and there’s like five people there.

What stage of an artist’s career do you typically sign them and what are you looking out for?

Jim: That’s a difficult question. All you want to do as an A&R man is sign something utterly amazing. That’s all I’m ever looking for. It’s finding a needle in a million haystacks.

Then when you do find it, you run after it. It doesn’t really matter whether they’re three albums down the line, or they’ve written half a song, a riff, that you can’t get out of your head.

You have to go with the courage of your convictions.  If I knew what formula made a ‘hit’, how it worked, I wouldn’t be sat here. I’d be on a beach.

“If I knew the formula that made a ‘hit’, I wouldn’t be sat here. I’d be on a beach.”

Jim Chancellor, Fiction

[A&R] is easier when there’s lots of stuff happening around [an act], and you see that whole music business furore about a hot band.

But how many times have we seen a hot band land a deal and then you never hear from them ever again?

You’ve got to look for stuff you believe in, that you can see a future with. You mentioned The Maccabees, I love that band so much. But they love being themselves.

It’s difficult to be in a band for 10 years, especially when you’re not headlining Glastonbury – when you’re really grafting. All the plaudits should go to them, because they stuck together.

Fiction is a smaller label within Universal. Do you still feel the pressure from the top to hit quarterly targets? You speak from the heart, but you’ve got to make the balance sheet make sense…

Jim: Yeah, you’ve got to be responsible. I’d lie if I said I didn’t feel the pressure. But to be honest, my boss is brilliant.

Fiction is Universal’s garden shed. Not many people go in there and not many people know what goes on in there.

“Fiction is Universal’s garden shed. Not many people go in there – yet every now and again something really interesting comes out.”

Jim Chancellor, Fiction

Yet every now and again something interesting comes out of it.

We have a slightly different way of doing things, I guess, to some of the bigger labels – we don’t have the resources, people, money, whatever.

The scary A&R stats MBW ran this week are based on unit sales. Does the music industry need to start judging itself on revenue instead? If so, why?

Alison: Yes, it’s crucial.

We’ve just gone day and date [as a UK industry], which means records aren’t [following the pattern] of a big build up, then a big week one release. Now tracks live and die on whether people love them or not. That’s it.

Calvin Harris is a good example. His recent single may not have achieved a [No.1] chart position, but actually it’s sold more [than most big singles], has been in the market longer, and it still continues to grow around the world.

“It’s crucial that we start judging ourselves on revenue. The mindset needs to change.”

Alison Donald, Columbia

If we are to get through this next transitional period, when deals will need to be more bespoke, there will still be the big singles.

As my friend and colleague Fred [Bolza] describes it, these massive singles make now ‘the 50s on steroids’. That’s great. They work brilliantly for a Calvin Harris.

But if you’re a Kasabian or a Vaccines, they don’t so much – it’s the live, the sync, the multiple income streams, where you see the benefit.

It’s a mindset that needs to change.

The box office chart for movies is based on revenue. How would you feel about that happening in music?

Alison: Great. The chart should absolutely be a reflection of your scale. There are bands who are huge live but don’t sell [many records].

This week, Activision Blizzard came out and said that in three days the latest Call Of Duty had turned over $550m. But the music industry’s very much, ‘Oh no, we couldn’t possibly talk about the money behind this deal.’ Is there a cultural barrier here – we don’t like to talk about music in monetary terms because it’s ‘art’, while cinema and video games don’t have such hang-ups…

Alison: [Pauses] Yeah. But these are artists! Video games are [made by] programmers.

Jim: Artists are often very sensitive people. They usually don’t like to talk about money – even when they’ve got loads of it.

Nick, I don’t want to to make you justify sins of the past if your views have changed. But at Sony you must have signed many a ‘360 deal’. Are they justified, especially at a major label?

Nick: Well, yes. Sony was very fortunate with its relationship with something like the X Factor – there, I think there’s a fair justification for taking a big slug of ancillary revenue. You had the show, and then you created those brands like One Direction.

It’s no great trade secret: Sony made an awful lot of money from One Direction ancillaries.

“It’s no great secret: sony made an awful lot of money from one direction ancillary income. But on 90% of regular deals, live and merch are earning the majors f*ck all.”

Nick Gatfield, Twin

But on 90% of regular deals, it’s a competitive environment and invariably it’s a seller’s market, so you ended up with 10% of ancillaries. So I can tell you, [majors] make f*ck all from [ancillaries in typical 360 deals]. Nothing.

In terms of new music, if you take out TV/reality stuff, then ancillary income – live, merch etc. – will be generating less than 10% of [a label’s] revenue.

The precedent for Twin’s model was one particular deal during of the more interesting periods of my career. I say ‘interesting’ with some irony.

I was at EMI under Terra Firma, where I had the job title of running ‘new music’, whatever that meant.

Actually, I soon realised what it meant was that new music was expensive and high risk so Terra Firma didn’t like it – at all.

Because they’re a private equity company. Judging you on the basis of a private equity company…

Nick: It was incredible. We’d have to do deals by things like the internal rate of return and the average cost of capital. Rock and roll.

But one of the deals we did was with Deadmau5. It changed my way of thinking a lot.

EMI at that time was massively uncompetitive, largely because of being owned by private equity. It was constantly under threat of being sold, folded, whatever. No right-thinking manager would have signed with us over Universal or Sony.

“With deadmau5, what moved the needle was putting out music in the underground [for free]. In a traditional record deal, it would have been an anathema.”

Nick Gatfield, Twin

So that only left one A&R strategy: you had to do deals other people wouldn’t do. Deadmau5 was looking for investment in his live business. He liked the idea of being in partnership with a global company. It was an expensive, million dollar deal. But if was a full 50/50 JV for five years [across all of his revenue streams]. We created Deadmau5 Inc – EMI and Deadmau5 were equal shareholders.

It was incredibly successful. There were marketing commitments; EMI had to support the growth of his live shows.

What was liberating about it was realising that what moved the dial for Deadmau5 was putting music out in the underground – not trying to commercialise it at all.

His live business was growing largely because the music was free and being shared and talked about. In a traditional record deal, that would have been an anathema.

Jim, the scary A&R figures I keep quoting are all about album sales. But maybe that’s in itself old-fashioned. Are you prepared for the day that the importance of the album to the business falls away – when streamed tracks and playlists become the priority?

Jim: It’s already here. [Caroline signing] Glass Animals is a really good example of it.

They’ve sold 300,000 albums and done over 100m streams of tracks. They’ve sold out Shepherd’s Bush Empire without being played on any of the UK’s major national radio stations.

That band have a career. The streaming part of their business is about 50% [of their income] now – and that includes live.

Personally, I love vinyl and I actually quite like CDs.

You’re not supposed to say that anymore!

Jim: I know, I know. Just wait for the CD revival…

The streaming thing is brilliant. Some of those platforms are so easy to use. None of them are perfect yet, but they’ll grow.

I saw some statistics the other day which said there aren’t as many people on Apple Music as Spotify yet – for reasons we don’t need to go into – but the people who are on Apple Music are consuming three or four times the amount of music [per user] as the people on Spotify.

“I saw some statistics the other day which said [individual users] of Apple Music are consuming three to four times the amount of music as the people on spotify.”

Jim Chancellor, Fiction/Caroline

I thought that was really interesting: quite a lot of muso-type people are going into that world.

It’s here, but it doesn’t quite add up to what the labels and artists were used to [in a sales world]. It’s a transitional period. We’re going from what was to what will be.

It’s going to be really tough, but I think the future’s really bright. Nothing’s guaranteed, but it does feel positive.

You know, we used to not even bother making vinyl as no-one gave a toss. But we made the latest Tame Impala record and manufactured the vinyl, globally, from the UK. We manufactured 75,000 copies. That’s nuts.

The album isn’t just a cultural priority. It’s a business priority, and major label execs are still set targets and bonuses based on ‘albums’ – deals are done in ‘albums’. Nick, does this need to change?

Nick: Yes. In fact, it’s something we initiated at Sony – although I don’t know if it was seen through; this idea that everything needs to be revenue-based now, not based on units.

An album is an arbitrary platform for music. It became a thing because of what technology provided at a particular time – it wasn’t because people decided to go and write a 45 minute piece of music with X number of tracks.

“I don’t think the album has a divine right to survive as a format.”

Nick Gatfield, Twin

That’s why when CDs came out you’d have 75 minutes of music, of which 30 was rubbish – endless remixes just to fill up the format.

I don’t think the album has a divine right to survive as a format. Quite honestly I wonder if the majority of people buying a [vinyl] album now are buying it as merchandise, rather than an audio format.

And there’s nothing wrong with that if they are.

It’s kind of sad though – to see vinyl stuck behind glass in a frame.

Alison: Yes, but it’s still that tribal thing with an artist.

Nick: Yes – it’s merch. It’s no different than spending £25 on a hoodie.

Jim: Please, people, just take the black circular disc out first.

This isn’t a nice question, but if we’re talking about 95% of new artists not making platinum debut albums, that means one thing… most of them will get dropped. How do you know it’s time to part ways with an artist? When do you give up on your dream – because you signed them – that they’re going to ‘make it’? What are the tell-tale signs?

Jim: When it’s burnt down. I’m trying to think of the best way to describe it.

This is going to sound really harsh. [Pauses.] Has anybody ever had a dog? [Crowd laughs.] Where they’re nearing the end of their life and you just know that they’re not much longer for this world? It’s that.

Alison: When it becomes really unsustainable. One always keeps trying because you never know. But ultimately crossing the art/commerce value bridge is what we do.

“Has anybody ever had a dog? When they’re nearing the end of their life and you know they’re not much longer for the world? It’s That.”

Jim Chancellor, Fiction/Caroline

Sometimes it’s very clear: when the music’s not great, the financials are completely unsustainable, your boss is telling you it’s bad.

But… there’s many stories of acts who’ve been dropped and gone on to huge success. If in doubt, go with the art – if the music’s not there and the financials are too horrific for you to go in and say [to your boss] ‘please give them one more chance’, it’s time.

It’s obviously something one hates, but it’s not always the end of a band’s career – by any means.

Nick: Normally the tell-tale sign is when your boss tells you…

But Alison said that, and you were her boss! Now you’re blaming your boss – where does the buck stop!?

Nick: We go back to metrics. I don’t think metrics can or should ever dictate an A&R decision.

Without wanting to make it sound like a dark art, A&R decisions are made through an instinctive process.

But when you can’t ignore metrics is when you take music to market. That’s an incredibly expensive process – it’s a big roll of the dice.

“I don’t think metrics can or should ever dictate an a&R decision. But you can’t ignore them when you take a record to market.”

Nick Gatfield, Twin Music

If you’re putting music out into the ether and you’re using all the platforms we’ve been talking about and nothing comes back… you know what? You’re wrong. Sometimes, you’re just wrong.

You can do it two or three times – ‘I’m going to go again’ – but if the same answer keeps coming back, you’re wrong.

That’s when you need to be completely clear and admit: ‘I made a mistake.’Music Business Worldwide

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